Economy

(Reuters) -Lululemon Athletica cut its annual sales and profit forecasts on Thursday, as demand for its pricey leggings and tank tops slowed in North America amid selective consumer spending.Its shares swung between heavy losses and gains to settle 5% higher after the bell as the athleisure wear maker’s profit beat estimates and it promised to speed up efforts to improve the product mix.The company has seen a slow start to 2024 after years of strong growth as persistent inflation led to selective spending by shoppers.Its women’s business has taken a hit from slower innovation in seasonal apparel, lower stock of smaller sizes and color and product missteps.Lululemon (NASDAQ:LULU) had to pull its “Breezethrough” leggings from stores and website within weeks of its July launch as customers complained about the fit, material and seams, resulting in fewer new options for women’s bottom wears. “For 2025, we are fast-tracking new styles within performance, shorts, tops, and track suits,” CEO Calvin McDonald said on a post earnings call.”We are optimistic that we will begin to see the benefits of these strategies over the upcoming quarter.”Lower promotions and a tight check on costs aided gross margin which 80 basis points in the quarter. The company’s shares have declined about 14% in the last three months as investors braced for a forecast cut. They have lost nearly half of their value this year.Comparable sales rose 2%, but missed expectations of a 6.05% increase, driven by a 3% decline in sales in Americas. Comparable sale surged 21% in China.”Athleisure spending continues to wane overall, but we have also seen Alo and Vuori continue to gain share against Lulu,” Jefferies analyst Randy Konik said.The company expects fiscal 2024 net revenue in the range of $10.38 billion to $10.48 billion compared with a prior forecast of $10.70 billion to $10.80 billion. It expects to earn $13.95 to $14.15 per share compared with its previous forecast of between $14.27 to $14.47.In the second quarter, it earned $3.15 per share, better than LSEG estimates of $2.93. More

The Commerce Department at 8:30 a.m. ET Friday will release its personal consumption expenditures price index.
For the July reading, the Dow Jones consensus sees little change in recent trends — 0.2% monthly increases in both headline and core prices, and respective gains of 2.5% and 2.7% annually.
The report could influence the September rate decision even as policymakers appear to have their focus elsewhere these days.

A customer shops at a supermarket on August 14, 2024 in Arlington, Virginia. 
Sha Hanting | China News Service | Getty Images

Federal Reserve officials will get the latest look at their favorite inflation indicator Friday, a data snapshot that could influence the September rate decision even as policymakers appear to have their focus elsewhere these days.
The Commerce Department at 8:30 a.m. ET will release its personal consumption expenditures price index, a sprawling measure of what consumers are paying for a variety of goods and services as well as their spending preferences.

While the Fed uses a whole dashboard of indicators to measure inflation, the PCE index is its go-to data point and its sole forecasting tool when members release their quarterly projections. Policymakers especially hone in on the core PCE measure, which excludes food and energy, when making interest rate decisions.
The Fed prefers the PCE over the Labor Department’s consumer price index as the former takes into account changes in consumer behavior such as substituting purchases, and is broader.
For the July reading, the Dow Jones consensus sees little change in recent trends — 0.2% monthly increases in both headline and core prices, and respective gains of 2.5% and 2.7% annually. At the core level, the 12-month forecast actually indicates a slight bump up from June, while the all-items measure is the same.
Should the readings roughly match the forecast, they should do little to dissuade Fed officials from following through with a much-anticipated interest rate cut at their Sept. 17-18 policy meeting.
“To me, it’s going to be just one more piece of evidence to confirm that the Fed is seeing sustainable inflation readings at a sustainable pace,” said Beth Ann Bovino, chief economist at U.S. Bank. Any slight upticks are “really just base-effect kinds of things that aren’t going to change the Fed’s view.”

Fed officials aren’t declaring victory over inflation yet, though recent statements indicate a more positive outlook. The central bank targets inflation at 2% annually.

While the respective PCE readings haven’t been below that level since February 2022, Fed Chair Jerome Powell last week said that “my confidence has grown” that inflation is heading back to target. But Powell also expressed some reservations about the slowing labor market, and it appears the Fed now is tilting away from being an inflation fighter and focusing more on supporting the jobs picture.
“The upside risks to inflation have diminished. And the downside risks to employment have increased,” Powell said.
That view has been taken as an indication that policymakers will be focused more on preventing a labor market reversal and a broader slowdown in the economy. In turn, that could mean less of a focus on numbers such as Friday’s PCE reading and more on the Sept. 6 report on August nonfarm payrolls.
“The focus on the Fed is going to be on the jobs front,” Bovino said. “They seem to be more attuned to whether the jobs side is getting a little weaker. I think that’s the focus of their monetary policy.”
In addition to the inflation readings Friday, there will also be a look at personal income in July, which is expected to increase by 0.2%, and consumer spending, which is projected to rise 0.5%.

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The People’s Bank of China (PBOC) purchased 400 billion yuan ($56.3 billion) worth of 10-year and 15-year bonds in open market operations, it announced on its website. The news came a day after the central bank added a new section for announcements of its buying and selling of government bonds, kindling speculation that it is getting ready to intervene.The central bank has been warning market participants for weeks about the inflated prices of bonds, which have driven yields to record lows, as banks and investors seek safe assets in a flailing economy.The PBOC said in July it had hundreds of billions of yuan worth of bonds at its disposal to borrow, and would sell them depending on market conditions. Its purchase revived expectations that the PBOC will step in soon to sell the bonds to keep yields from falling further. “Banks bought the treasuries from the finance ministry, and then sold them to the PBOC, which is ready to offload them in the market,” said a fund manager who declined to be identified. The news did not affect bond yields. Traders pointed to a government announcement last week that it would roll over, rather than redeem, a batch of bonds maturing on Thursday. Some analysts said the PBOC’s bond buying was also meant to ensure that rollover of bonds did not impact cash conditions.China’s 10-year government yield was last trading at 2.17%, down around 40 basis points this year. “Concerns over long-term yields had initially decreased, but this announcement has stirred up market worries again,” said Xing Zhaopeng, senior China strategist at ANZ. State banks have been seen selling bonds this month, and they sometimes act on behalf of the central bank.In a move to temper the bond rally, China’s securities regulator has ordered some brokerages to inspect their bond trading activities.The PBOC last bought special treasuries from primary dealers in December 2022.($1 = 7.1001 Chinese yuan renminbi) More

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BERLIN (Reuters) – German inflation fell more than expected in August, declining to its lowest level in more than three years and making it easier for the European Central Bank to cut interest rates in September.Inflation eased to 2.0% in August, its lowest level since June 2021, thanks to lower energy prices, preliminary data from the federal statistics office showed on Thursday.Analysts polled by Reuters had forecast a reading of 2.3% in August, after a year-on-year increase in consumer prices of 2.6% in July, based on data harmonised to compare with other European Union countries.”People have more money in their wallets again,” German Chancellor Olaf Scholz said on Thursday on social media platform X, noting that inflation was falling and real wages were rising for the fifth quarter in a row. “That’s good, we’ll stay tuned!” Scholz said.The German data comes ahead of the euro zone inflation release on Friday.Inflation in the bloc is expected at 2.2% in August, down from 2.6% in the previous month, according to economists polled by Reuters.”The just-released flash estimate of German inflation in August has everything the European Central Bank needs to continue cutting rates at the September meeting,” said Carsten Brzeski, global head of macro at ING. The inflation report shows the first signs of a broader disinflationary trend, which goes beyond energy prices, Brzeski said.Markets have now fully priced in an interest rate cut from the ECB at its next policy meeting next month and at least one more move later this year.In August, energy prices in Germany fell by 5.1% compared to the same month last year. The German economy shrank by 0.1% in the second quarter of 2024 compared with the previous three-month period, spurring recession fears. A technical recession is defined as two consecutive quarters of negative growth.”Fading inflationary pressure combined with fading growth momentum offer an almost perfect macro backdrop for another rate cut,” Brzeski said.Core inflation, which excludes volatile food and energy prices, was at 2.8% in August from 2.9% in the previous month. “That paves the way for a September rate cut, but with services inflation still sticky, the easing cycle will be gradual,” said Franziska Palmas, senior Europe economist at Capital Economics. The economic think tank forecasts the central bank will cut rates only once every quarter, until the deposit rate reaches 2.5%.Economists expect a bumpy ride ahead for inflation.”From now on things are unfortunately on the up again,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, adding that the inflation rate is likely to move back towards 3% in the next six to 12 months. More